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You Are Causing Your Business to Leak Growth and Profits!

by Howard Shore

4 minute read

    leak

    Albert Einstein said, “If I had an hour to solve a problem I’d spend fifty-five minutes thinking about the problem and five minutes thinking about solutions.”

    Every business is what I refer to as a “Leaky Bucket,” and most of those leaks can be contained—if you are willing to change your mindsets and lead your business a little differently! Let’s start with the fact that it takes thought followed by proper planning to evaluate your bucket before you can begin resolving the issues at hand.

    Recently I conducted a quarterly strategic planning meeting for a Leaky Bucket where some leaders were not facing the brutal facts, dooming all of their proposed solutions to failure:

    Issue: How was the company going to achieve a very aggressive goal that they believe is achievable?

    Real Circumstance: The company always has aggressive goals. It has the most innovative products in its industry. There is great talent and longevity in key members of its team, yet it has never broken out as an industry star. It has been faced with constantly high turnover in the ranks. Leadership is always faced with carrying the heaviest burden to get its most important priorities done, is experiencing burnout, and has had a track record of product problems with clients. While they’ve always resolved specific problems, it has required heroic efforts by team members and created diminishing confidence on the part of customers.

    Mindsets that were causing this pattern: The company tied everyone to a bonus system that was short-term focused. The leaders were always focused on salary levels rather than contribution levels of individuals. They did not consider the effects of long periods of overtime on worker productivity, engagement, and satisfaction. The short-term profit mentality combined with the philosophy that everyone had to operate in overdrive at all times were two major contributors to the following data: they have headcount needs of 73 people, just hired 15, and still need 10.

    Here is my point, most companies have a lot more growth and profit potential staring them right in the face, but the leadership continues to get in their own way. This is the Leaky Bucket Principle, and all companies have Leaky Buckets. As they occur, I want you to visualize cash pouring out of a bucket through lots of various sized holes. You can also imagine cash flowing over the top because the bucket has not grown fast enough. That is not to say your accountants are wrong. The concept of generally accepted accounting principles is sound and needed. However, here’s where accounting fails us: Your financial statements can be correct, yet you could still go out of business. No financial statement will show all the places where a business is failing. In other words, where would one go to examine and understand one’s Leaky Bucket? When addressing leaks, the numbers often are much bigger than the numbers the financial statements are capturing. It’s frustrating that everyone in the above organization was working extremely hard and destroying a ton of cash at the same time.

    Certainly, leaks can occur anywhere, but I have found that most leaks fall under three categories. These include:

     

    People Leaks

    People leaks cause unnecessary problems within your organization. These unproductive dramas take leaders’ and mid-managers’ time and attention away from being strategic, interfacing with customers and other key stakeholders, and having more productive interactions with their team.

    Profit Leak #1: Poor Leadership
    Profit Leak #2: “B” and “C” Players
    Profit Leak #3: Financial Transparency
    Profit Leak #4: Vacant Positions
    Profit Leak #5: Excessive Turnover

     

    Strategy Leaks

    We analyze strategy leaks in two ways. On the one hand, we consider whether your company is growing at an acceptably high level, whether this growth rate is predictable, and whether you believe it will continue for the next several years. On the other hand, does your business model create sufficient cash flow? Again, revenue is vanity, profit is sanity, and cash is king!

    Profit Leak #6: Action Without Purpose
    Profit Leak #7: Failing to Differentiate Properly
    Profit Leak #8: Focusing on Tactics Instead of Strategy
    Profit Leak #9: Chasing Revenue Everywhere and Anywhere

     

    Execution Leaks


    Finally, execution leaks are forms of waste in your business. Fixing this issue requires finding the best ways to turn revenue into profit and cash by being efficient with your processes, time, and resources.

    Profit Leak #10: Ineffectively Communicating Your Goals and Expectations
    Profit Leak #11: Emphasizing the Wrong Priorities and Not Aligning the Team
    Profit Leak #12: Being Allergic to Saying “No”
    Profit Leak #13: Monitoring the Wrong Numbers
    Profit Leak #14: Holding Ineffective Meetings or Lack of Meetings
    Profit Leak #15: Failing to Create a Culture of Accountability

     

    Do You Want Your Business to Run at Peak Performance?

    Have you identified where the potential leaks are in your business bucket? Here’s the first step toward increasing your business success: Accurately identify your leaks and work toward patching the places where your profits are not fully being captured. In my experience, most companies lack the strong leadership operating system and process to help you pull everything together. The evidence is in the leaks.

    A strong leadership operating system includes the following aspects:

    • You have a process set aside for regular strategic discussion throughout the year.
    • Your core values and purpose are alive throughout your organization.
    • There is a healthy, aligned leadership team that understands each other’s differences and priorities.
    • The entire organization is aligned around three (no more than five) priorities, with quarterly initiatives to address those priorities.
    • There is a communication rhythm established, and information moves through your organization accurately and quickly.
    • Every function, position, and financial statement line item has clear accountability, ensuring goals are met.
    • A system for collecting and using employee input generates regular input and is causing meaningful changes to your business.
    • A system for collecting and using customer feedback and data to improve existing operations and for developing new products and services is functioning well.
    • You have an innovation process that ensures you will keep growing long into the future.

    Published by Morgan James Publishing, Your Business is a Leaky Bucket, will help you uncover the fifteen leaks that most businesses unknowingly suffer from and in turn can save you millions of dollars in lost profit, lost revenue, lost resources and lost time. Howard Shore’s goal with this book is to impact businesses around the world and you can help by picking up your copy this week by going to: Your Business is a Leaky Bucket.

    Howard Shore

    Howard Shore

    Howard Shore founded Activate Group, Inc., has owned and founded 5 businesses, held various leadership positions, including CEO, achieving exceptional results for companies such as Ryder, AutoNation, and KPMG, LLP. At the helm of Activate Group, he has become one of the country’s premier business and executive coaches, helping hundreds of executives and their teams improve their professional performance, and has spoken across the US to executive level audience of all sizes. He is a Certified Public Accountant, Certified Gazelles Coach, Certified Executive Coach, Certified Behavioral Analyst, Certified Values Analyst, and Certified Attributes Index Analyst. He earned his Bachelor and MBA degrees from Florida International University, and completed advanced executive programs at Harvard Law School and the University of Chicago.

     
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